Special Report on B.C. Ferries – Part 1: A sea of change

A passenger walks up the passageway to Berth No. 5 at B.C. Ferries’ Tsawwassen terminal to wait for the arrival of the ferry from Swartz Bay on Vancouver Island. In the background a ferry heads out on the Tsawwassen-Duke Point run.

If there is one collective cry from the three major stakeholders in B.C. Ferries, it is this: Things need to change.

The independent B.C. Ferry Commission, the two-man office tasked with providing oversight and regulation to North America’s largest ferry service, has declared a “tipping point” in affordability, recognizing that the $2.5 billion needed for ferry replacement over the next decade needs to be accompanied by a longer-term vision than business as usual.

In the meantime, fares will continue to rise – capped at 12 per cent over the next three years – to help meet the bottom line in the wake of a 13-year low in vehicle traffic and a 21-year low in ridership.

Many of the residents who depend on the 25 coastal routes believe it’s an issue of simple mathematics: lower the fares and ridership will increase.

Tempting as this theory seems, it doesn’t tell the entire story.

B.C. Ferry Commissioner Gord Macatee spent most of last year consulting with more than 30 coastal communities before setting the maximum fare increases and instructing the ferry corporation to find $54 million in efficiencies.

While he sympathizes with the added financial burden to taxpayers, he agrees that there is a “huge risk” with cutting fares to stimulate higher ridership.

Macatee said the drop in marine ferry traffic is roughly equivalent to that seen on free-of-charge B.C. inland ferries, those that connect the highway system throughout the Interior.

And the much-publicized CoastSaver program, where weekend fares on the major routes were reduced in May and June, failed to produce any increase in ridership from the previous year.

“It’s hard to refute the fact that a 30-per-cent price reduction didn’t result in any lift in ridership,” he said. “And if ridership doesn’t rise, the company is in trouble.”

• • •

Since 2003, provincial legislation binds the publicly owned but privately run corporation to deliver a minimum number of sailings on each route.

Hours of operation, minimum capacity and frequency and number of trips are all dictated by a core service agreement between B.C. Ferries and the province.

It prevents the corporation from easily reacting to lower ridership, but it’s meant to ensure the corporation stays anchored in its founding notion.

“People still need to have the ability to get to work, get to school, buy their groceries, get their supplies,” Macatee said.

Transportation Minister Mary Polak announced on Monday that a formal public consultation on the future of coastal ferry service will run until Dec. 21. It will result in $30 million in service cuts over the next three years.

“We intend to make (the consultation) as broad as possible,” she said.

Town hall meetings are being held in 30 communities across B.C., and feedback forms can also be submitted online at coastferriesengagement.ca.

Polak’s office has already identified $9 million in sailing cutbacks on the major routes between Vancouver Island and the mainland.

That means another $21 million must be trimmed from among the money-losing minor routes of the Gulf Islands and the North.

“It’s very difficult to take a look at specific sailings and try to surgically make changes to ones that are not reaching their capacity, because you have issues like labour agreements and fuel costs. You can’t simply flip a switch and have a ferry turn on and off,” Polak said.

• • •

Eighty per cent of B.C. Ferries’ expenses are comprised of fuel and labour costs.

The price of marine diesel has risen nearly 150 per cent since 2004 and ate up $121 million of the 2012 budget. The volatility of the “dirty” fuel compelled Macatee to push B.C. Ferries on alternative energy sources.

“Liquified natural gas (LNG) is abundant in B.C.; it’s very low-cost and environmentally superior,” he said.

The company estimates it would reduce its fuel costs by 60 per cent with a switch to LNG.

But the expense and time commitment of retrofitting mid-life ships means that only the 11 vessels slated for replacement in the coming decade will be considered.

Macatee said fuel savings can still be found with careful scrutiny. B.C. Ferries saved 700,000 more litres of fuel last year by making simple changes like reducing idling time and reducing the speed of ships.

“When you pay attention to things, you find a way to save.”

• • •

Efficiencies in labour costs could prove more difficult in the coming years.

Public outcry over ex-CEO David Hahn’s salary, bonuses and pension prompted a legislative change that means new executives will receive compensation more in line with senior public sector managers.

B.C. Ferries’ executive team was trimmed from 17 to nine positions in 2008, but unionized labour positions aren’t likely to change, with only a 0.5-per-cent reduction in employee numbers since 2003.

Transport Canada regulations require a set number of employees on each vessel based on maximum passenger capacity, which is a big factor in the $257 million spent each year on labour.

“A lot of people acknowledge that there’s a lot of overtime … and that’s one area that needs to be looked at, along with management,” said Gary Coons, NDP ferry critic.

While management positions have ballooned from 261 to 594 in the past nine years, it doesn’t tell the entire story.

“These are positions such as senior chief engineers, chief engineers and senior chief stewards, so they are not new positions to the company,” said B.C. Ferries spokesperson Deborah Marshall.

The management jobs were converted from union to exempt positions, she said.

• • •

Polak said she has been impressed with the ideas coming forward from coastal communities in the early stages of consultation, particularly with developing a long-term vision for B.C. Ferries.

“Many of them have already been giving a lot of thought to potential solutions, ideas like the use of water taxis or the use of passenger-only ferries,” she said.

But a new plan is a long way from completion.

dpalmer@vicnews.com

Did you know?

The Sidney-Anacortes ferry, operated by Washington State Ferries, costs $47.90 US each way for a driver and vehicle, the equivalent of about $16 less than the Swartz Bay-Tsawwassen run on B.C. Ferries.

The Washington ferry takes about three hours and adds about 100 kilometres of drive time, depending on where you’re travelling to on the mainland.

It also requires two border crossings, which can be unpredictable for wait times, and stops running between the end of December and March 23.

Only one ferry leaves the Island via Sidney, at noon, in the fall season and return trips take place once a day at 8:30 a.m.

A bonus for SmartCar drivers: The Sidney-Anacortes ferry is even cheaper at only $38.35 US for a driver and vehicle.

B.C. Ferries does not have reduced rates for SmartCar drivers, who have to pay the standard $64.10 one-way rate.

– Daniel Palmer

Timeline: A short history of B.C. Ferries

• Late 1950s – A strike by employees of the Black Ball Line causes the provincial government to decide that the coastal ferry service in B.C. needs to be government-owned.

• 1960 – B.C. Ferries’ first route is created, running between Swartz Bay and Tsawwassen and using just two vessels.

• 1960-1970 – B.C. Ferries takes over operations of the Black Ball Line and other major private companies providing vehicle ferry service between Vancouver Island and the Lower Mainland.

• Mid-1960s – The ferry system expands and begins servicing other small coastal communities. B.C. Ferries builds more vessels, many of them in the first five years of its operations, to keep up with the demand.

• Mid-1980s – B.C. Ferries takes control of operations of the saltwater branch of the B.C. Ministry of Transportation and Highways, which runs ferry services to small coastal communities.

• 1998-2000 – The “fast cat” program is launched in 1998, with three catamaran ferries built for the major routes. The program is mired in political scandal.

• 2003 – The province announces that B.C. Ferries, which had been in debt, will be reorganized into a private corporation, with the government the sole shareholder.

• 2004 – Controversy hits in July when B.C. Ferries announces it has disqualified all Canadian bids to build three new Coastal-class ships, and that only proposals from European shipyards are being considered. The contract is estimated at $542 million for the three ships. The first ship, Coastal Renaissance, enters service in March 2008.

• 2011 – B.C. Ferries reports a loss of $16.5 million due to falling ridership, with vehicle traffic dropping 3.5 per cent and passenger traffic 2.8 per cent. Critics point to increased fares as causing the reductions.

• August 2012 – B.C. Ferries announces it will cut 98 round trips on its major routes starting in the fall as part of a four-year plan to save $1 million on these routes.

•October 2012 – B.C. Ferries plans to raise ferry fares by 4.1 percent in 2013 and expects to have similar increases in each of the next three years.